What is an IPO and how does it work?
Meet Ajay. He owns a medium size company in Mumbai.
To expand his business outside Mumbai, Ajay would need Rs. 1 crore.
To raise this amount, Ajay decided to sell a part of his business to the public by issuing shares through an IPO. When a company issues shares to the public for the first time, it is done through an IPO or Initial Public Offering.
Ajay decided to sell 10% of his 10 crore company by issuing 1 lac shares priced at Rs. 100 each.
The shares were then listed on a stock exchange for the public to buy.
In time, Ajay’s business flourished & the share prices of the company increased.
The investors who bought his shares through the IPO, sold their shares at a higher price & made great profit.